Smart contract wallets are paving the way to web3 mass adoption — unlocking powerful new features that significantly upgrade the web3 wallet experience for existing participants and newcomers alike. Today, it’s no secret that the wallet experience sucks — with most traditional web3 wallets (like MetaMask, Coinbase Wallet, & Rainbow Wallet) being difficult and risky to use.
But with ‘smart accounts’ now possible, thanks to Ethereum’s introduction of ERC-4337 (or account abstraction), many more are opting to provide their users with better wallet experiences — turning to different types of smart contract wallets for various use cases. And one of those types of web3 wallets that are gaining significant popularity, are Multisig (aka Multi-signature) wallets.
But what even is a Multisig wallet in the first place? How is it better than other smart contract wallet options? What use cases does it unlock? And how do you use or build one?
In this blog post, we’ll demystify everything you need to know about Multisig wallets. We’ll go over what a Multisig wallet is, how it works, what use cases it enables, and how to get started with different Multisig wallet options — whether you’re a user, or a developer.
What is a multisig (aka multi-signature) wallet?
A multisig wallet is a type of smart contract wallet that requires multiple signatures or approvals from different parties to authorize transactions. This added layer of security ensures that no single individual can unilaterally control the assets within the wallet.
Multisig wallets enable better security, access control, and collaboration. By requiring multiple approvals, they reduce the risk of theft, hacking, or misuse of funds. Their versatility makes them perfect for a variety of use cases, which we'll explore further in the next sections.
How does a multisig wallet work?
Multisig wallets are built on smart contracts, acting as “programmable wallets” that use the smart contract’s code to establishes the rules for how many signatures are needed to approve a transaction and who the authorized signatories are. At its core, a multisig wallet is a smart contract deployed on a blockchain that contains the logic for managing addresses, signatures, and rules.
When a multisig wallet is created, the following parameters are defined:
- The number of signatories: This represents the total number of authorized signers who can approve transactions from the wallet.
- The number of required signatures: This is the minimum number of signatures needed to validate a transaction.
- The list of signatories' public keys: These keys are used to verify the signatures and confirm the identity of the signatories.
A multisig wallet operates using a combination of cryptographic signatures and smart contract logic. When a transaction is proposed, it is stored within the wallet's smart contract, along with the required number of signatures. As signatories provide their signatures, the smart contract validates them against the public keys of the authorized parties.
When a transaction is initiated, it is broadcasted to the signatories, who then sign it using their private keys. The smart contract then verifies if the required number of signatures have been collected. If the condition is met, the transaction is considered valid and can be executed on the blockchain. Otherwise, it remains pending until the necessary approvals are gathered.
Once the required signatures are collected and verified, the smart contract executes the transaction. If the transaction involves transferring assets, it updates the wallet's balance accordingly. In the case of a function call to another smart contract, the multisig wallet's smart contract forwards the call to the target contract.
This mechanism in multisig wallets enables powerful use cases that are not typically possible in traditional web3 wallets.
What is a multisig wallet used for? 4 example use cases
- Team wallets for organizations, DAOs, and companies: Multisig wallets enable secure and controlled access to shared funds by requiring multiple signatures for transactions. This feature ensures that no single individual has full control over the funds, promoting transparency and collaboration.
- Backup and recovery: By distributing the required signatures among multiple trusted parties, a multisig wallet can act as a safety net in case of lost or compromised private keys. This setup helps to protect against single points of failure and ensures that funds remain accessible.
- Escrow services: Multisig wallets can be used to create trustless escrow services where an impartial third party, such as a mediator or arbitrator, is added as a signatory. The escrow process is secure and transparent, as funds are only released when all parties agree.
- Family or shared wallets: Multisig wallets can be used to manage shared assets among family members or friends. By requiring multiple signatures, it ensures that all parties agree on the use of funds, promoting accountability and trust.
Pros and cons of Multisig wallets
Pros of multisig wallets
- Enhanced security: Multisig wallets require multiple signatures from different parties to authorize a transaction, reducing the risk of theft or unauthorized access. This setup helps prevent a single point of failure.
- Collaboration and decision-making: By requiring multiple parties to approve transactions, multisig wallets promote collaboration and collective decision-making, ensuring that all stakeholders are involved in crucial financial decisions.
- Customizable approval schemes: Multisig wallets can be set up with a flexible "M-of-N" signature scheme, allowing users to choose the number of required signatures (M) out of a total number of participants (N) for transaction approval. This feature enables users to tailor the wallet's security and operational requirements to their needs.
- Improved access control: With multisig wallets, users can assign specific roles and responsibilities to different participants, ensuring strict control over digital assets and enabling clear separation of duties.
Cons of multisig wallets
- Increased complexity: Multisig wallets can be more complex to set up and manage compared to single-signature wallets, as they involve coordinating multiple parties and their respective private keys.
- Slower transaction times: Transactions can take longer to process in a multisig wallet, as they require the coordination of multiple parties to obtain the necessary signatures. This can be particularly cumbersome when participants are spread across different time zones.
- Higher technical expertise needed: Setting up and managing a multisig wallet may demand a higher level of technical knowledge. Users need to understand how to securely manage multiple private keys and coordinate the signing process among participants.
- Limited wallet compatibility: Not all wallet providers or blockchain platforms support multisig functionality. This can lead to a lack of support, resources, and compatibility with other tools or services.
List of 8 top Multisig wallets
There are many Multisig wallet providers that users and developers can start using today, each with its own unique features. Some of the most popular examples include:
The choice of a multisig wallet depends on your specific needs and preferences, as each multisig wallet has its unique features and benefits. We recommend researching the different options and comparing their capabilities to determine which wallet aligns best with your goals and requirements.
Multisig wallets vs. MPC wallets: What’s the difference?
Multisig wallets and MPC wallets both serve to enhance security and control over digital assets by involving multiple parties in transaction approvals. However, they are not the same thing, as they operate based on different underlying mechanisms.
Multisig (short for Multi-Signature) wallets, require multiple signatures from different parties to authorize transactions. A multisig wallet is typically set up with an "M-of-N" scheme, where M signatures out of N total participants are required to approve a transaction. The private keys are not divided in this case; instead, each participant has their own distinct private key.
Multi-Party Computation (MPC) wallets, on the other hand, use a cryptographic technique where the private key is divided into multiple shares, with each share distributed among different parties. The key is never reconstructed in its entirety. Instead, the parties jointly perform computations required for transactions, such as signing, without revealing their individual key shares. This approach enhances security by eliminating a single point of failure.
So while both multisig and MPC wallets involve multiple parties in the transaction process, they differ in the way they handle private keys and transaction approvals. Multisig wallets require distinct private keys for each participant and a specified number of signatures for transaction approvals, while MPC wallets rely on splitting private keys into shares and performing joint computations.
Frequently Asked Questions (FAQs)
What type of wallet is a multisig wallet?
A multisig wallet is a smart contract wallet. It leverages smart contract code to enforce the rules and conditions specified during wallet setup.
Is MetaMask a multisig wallet?
No, MetaMask is a single-signature wallet by default. However, it can interact with multisig wallet smart contracts to facilitate transactions.
Is Coinbase Wallet a multisig wallet?
No, Coinbase Wallet is a single-signature wallet. But like MetaMask, it can interact with multisig wallet smart contracts to facilitate transactions.
Can a multisig wallet get hacked?
While multisig wallets provide an additional layer of security, they are not immune to hacking. It's essential to follow best practices for securing your wallet and private keys.
Can I change the signatories of a multisig wallet?
Yes, most multisig wallets allow you to modify the list of signatories. However, the process typically requires signatures from the current signatories, ensuring that any changes to the signatories are agreed upon by the existing parties.
Are multisig wallets only available on Ethereum?
No, multisig wallets are available on various blockchains that support smart contracts, including Ethereum, Binance Smart Chain, Polkadot, and others. The implementation of multisig wallets may differ based on the blockchain's smart contract capabilities and the wallet's design.
Which multisig wallet is best?
Selecting the right multisig wallet depends on factors such as the blockchain you are using, the number of signatories, the required number of signatures, and the specific use case. When choosing a multisig wallet, consider its security features, ease of use, and the level of community support and development.
Can I use hardware wallets with multisig wallets?
Yes, many multisig wallets support integration with popular hardware wallets like Ledger and Trezor. By using hardware wallets, you can further enhance the security of your multisig wallet by keeping your private keys offline and providing an additional layer of protection against unauthorized access.
Are multisig wallets more expensive to use than regular wallets?
Multisig wallets may have higher transaction fees compared to regular wallets due to the additional complexity of managing multiple signatures and smart contract interactions. However, these fees are generally nominal and are offset by the increased security and functionality provided by the multisig wallet.
Concluding thoughts: Are multisig wallets the future of Ethereum wallets?
Multisig wallets offer a powerful solution for managing digital assets securely and collaboratively. By requiring multiple signatures to authorize transactions, they enhance security and reduce the risk of single points of failure — unlocking decentralized collaboration and decision-making across various use cases.
We hope this blog post has helped you better understand what a Multisig wallet is, how it compares to other smart contract wallet solutions such as MPC wallets, and how to get started with Multisig wallets.
And if you want to start building web3 apps with integrated Multisig wallets, get started with thirdweb’s web3 tools & SDKs — they’re free!